How does cost cutting at Best Buy impact its ROI?

best-buyBest Buy is struggling to thrive (and some would say it is even struggling to survive) as it competes with online giant Amazon.com. According to a recent article in Forbes, one way Best Buy is aiming to improve its financial outlook is to cut its cost of goods sold through supply chain efficiency gains.

Questions

  1. On what financial statement does Cost of goods sold appear?
  2. Assuming everything else remains the same, how will cutting cost of goods sold impact Best Buy’s Return on Investment (ROI)? Explain your answer in terms of the impact on Sales Margin and Capital Turnover.
  3. What are other ways Best Buy could improve its ROI?

Instructor Resources

These resources are provided to give the instructor flexibility for use of Accounting in the Headlines articles in the classroom. The blog posting itself can be assigned via a link to this site OR by distributing the student handout below. Alternatively, the PowerPoint file below contains a bullet point overview of the article and the discussion questions. The YouTube video link below is a narration of the blog post article (no discussion questions are included in the YouTube video; those can be assigned separately.)

  • Student handout (Word) (pdf) (contains entire blog posting + discussion questions)
  • PowerPoint file (brief article overview + discussion questions)
  • YouTube video (narrated article in shareable YouTube link)

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 3.0 Unported License.

About Dr. Wendy Tietz, CPA, CMA, CGMA

Dr. Wendy Tietz is a professor of accounting at Kent State University in Kent, Ohio, USA. She is also a textbook author with Pearson Prentice-Hall.

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